BCG Matrix¶
The BCG Matrix, developed by the Boston Consulting Group, is a strategic tool used to evaluate an organization’s product portfolio based on market growth rate and relative market share. It helps organizations allocate resources and prioritize products for growth, stability, or divestment. The matrix classifies products into four categories:
1. Stars¶
High Growth, High Market Share
Stars are products with a high market share in a rapidly growing market. They often require significant investment to sustain growth but have the potential to become future cash cows.
- Example: A leading smartphone model in a growing tech market.
- Strategy: Invest to maintain or increase market share.
2. Cash Cows¶
Low Growth, High Market Share
Cash Cows are products with a high market share in a slow-growing or mature market. These products generate steady profits with little investment, often funding other segments.
- Example: A popular soft drink brand in a mature beverage market.
- Strategy: Maximize profit and use cash flow to support Stars and Question Marks.
3. Question Marks¶
High Growth, Low Market Share
Question Marks are products in a growing market but with low market share. They require substantial investment to increase market share and may have the potential to become Stars, or they could fail.
- Example: A new product entering a competitive, fast-growing market.
- Strategy: Invest selectively or consider divestment based on potential.
4. Dogs¶
Low Growth, Low Market Share
Dogs are products with low market share in a slow-growing market. They typically generate little profit and may be considered for divestment to free up resources.
- Example: An outdated tech gadget in a declining market.
- Strategy: Divest or minimize investment to focus on more profitable products.
BCG Matrix Summary Table¶
| Category | Market Growth | Market Share | Strategy |
|---|---|---|---|
| Stars | High | High | Invest to maintain/increase share |
| Cash Cows | Low | High | Maximize profit, fund other segments |
| Question Marks | High | Low | Selective investment or divestment |
| Dogs | Low | Low | Divest or reduce investment |
Using the BCG Matrix¶
The BCG Matrix enables organizations to make strategic decisions about product investment, divestment, or growth, helping to balance their portfolio and allocate resources effectively.
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